Asian stock markets plumbed their lowest levels in six weeks on Wednesday after Wall Street greeted the new US President with its biggest inauguration day fall amid new signs of financial sector distress and global economic downturn.

Highlighting how the crisis set off by a US housing market slump has reverberated around the world, global miner BHP Billiton announced job cuts and a plant shutdown and the Australian government pledged to help companies plug a potential $49 billion funding gap.

“Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America -- they will be met,” he said upon taking the oath.

Obama also hinted at greater regulation, saying “this crisis has reminded us that without a watchful eye, the market can spin out of control.”

But investors still felt it was not enough.

“People still have expectations for his economic policies, but we know nothing concrete about them, so the market has no choice but to focus on the real economy and earnings,” said Yutaka Miura, chief technical analyst at Shinko Securities in Japan.

US stocks extended losses while the president spoke and kept falling after he finished with the S&P 500 closing down 5.3%, a record fall on an inauguration day.

Tokyo’s Nikkei hit a two-month low before recovering some ground in mid-day trade.

Investors were particularly unsettled by steep losses of major lenders that could freeze credit markets again and drive the world’s major economies deeper into recession already shaping up as the most severe downturn in several decades.

Banks hit again

Shares of State Street Corp, the world’s biggest institutional asset manager, plummeted 59% on Wall Street after it reported billions of dollars of unrealised losses, while Citigroup, Bank of America, JPMorgan Chase and Wells Fargo all lost between 20% and 29%.

Europe’s banking index fell to a 14-year low on fears that lenders will need more state help to raise capital after Britain announced its second bank rescue in three months and Royal Bank of Scotland said it was on course for the biggest loss in UK corporate history.

The dire state of British lenders prompted on Wednesday a call from a leading lawmaker for the government to nationalise RBS and Lloyds Banking Group.

Fears about the banking system helped push the pound below $1.39 for the first time since June 2001.

Australia, which says its banks are healthy and highly profitable, admitted it may have to help them plug a $49 billion funding gap for business if stretched foreign banks failed to roll over loans due in the next two years.

There were more signs of pain in the industry too.

Top miner BHP Billiton said on Wednesday it would cut 6% of its 101,000 workforce and close a nickel mine in Australia, joining rivals such as Rio Tinto in downsizing in response to tumbling global demand.

On Tuesday, Chrysler, a once mighty US car company, surrendered a 35% stake to Italy’s Fiat for zero cash, teaming up with a carmaker that is also struggling to survive. France weighed plans for an emergency aid package for its own battered auto industry.

China, the world economy’s main growth engine, is set to report fourth quarter growth at its slowest in a decade and Britain on Friday will confirm the world’s fifth-largest economy is now officially in recession.

Singapore, a small open economy that rises and falls with global trade, may shrink by as much as 5% this year, its government said.

Policymakers from Washington to Tokyo have responded by pledging hundreds of billions of dollars in bank bailouts and extra government spending and slashing interest rates.

But with US and Japanese interest rates near zero and borrowing costs heading there in many other economies, officials are increasingly looking beyond interest rates to prop up flagging demand.

Bank of England governor Mervyn King said on Wednesday that the central bank, which has cut its official rate to 1.5% this month, may decide to buy a range of financial assets from banks to increase available credit to companies.

Analysts expect another 50 basis point cut next month and the Bank of Canada joined the near-zero rate club on Tuesday, cutting its benchmark rate by half a point to a 50-year low of 1%.